Sharks in a Dunktank: My rant on the student debt Business

This is an issue that has been bothering me for some time, but does not get as much play in political discourse I think it should. In my opinion the high cost of education and my generation’s huge accumulation of loan debt are likely to be one of the biggest problems that ordinary people in this country face.

The increased integration of the global economy is dictating that we have a highly educated workforce in order to remain competitive. To get this, high-quality post-secondary education needs to be available to all who want it, and people who have received secondary education need to have the freedom to meet their potential.

Unfortunately, this is not the way the situation looks currently. The cost of post-secondary education has grown to unprecedented heights, and more than half of college graduates are indebted to student loan providers by the time they graduate. It has become commonplace for college graduates to be saddled with anywhere from $50 to over $100 thousand in debt.

I admit that I may be a little biased, being that this issue hits very close to home for me. I am a recent graduate myself and have seen many people in my age group saddled with unbelievable amounts of debt. As is reflected by my work at Public Citizen, I am an aspiring government reformer whose primary ambitions are in the nonprofit sector. I love the fact that I am able to work for an organization that makes efficient use of its funding and fights for the things I value, making a genuinely positive impact. This type of thing is not an option to many of the people I graduated with, because they are forced to work jobs that pay enough to pay off their accumulated debt.

While many of colleagues may not have chosen this career path anyway, it is unfortunate that it is not even a viable option for them. One cannot help but note the irony of many people my age being unable to fight the status quo because they are so heavily indebted to companies that want to preserve it.

The costs of education have continued to rise in this country, and government assistance has fallen heavily. Over the last few decades the amount of tuition costs paid for by Pell grants for students in need of financial assistance has dramatically declined from covering over 60% to below 30% of students. In 1997, amendments added to the Higher Education Act deregulated the student loan business and made it possible for lenders to charge huge interest rates and massive default penalties fees. Companies are now able to forbid refinancing and use of bankruptcy protections for debtors. Worse, they are now able to garnish wages and social security, as well as prevent debtors from obtaining professional certifications and use their influence to terminate debtors employment. Sally Mae and other companies are able to see to it that their debtors are unable to pay off their loans and accumulate enormous amounts of interest — and of course they have spent millions of dollars lobbying and donating to the campaigns of their allies in congress like House Minority Leader John Boehner and Senator Mike Enzi.

Much like the sub prime loans that led to the mortgage crisis last year, these loans are sold to incoming students as being much more affordable then they are in reality. They are not warned of the astronomical amounts of interests that these loans often accumulate, or how quickly interest rates can jump. Defaulted students loans have become a huge industry and this legalized loan-sharking has made the executives and share holders at Sally Mae and other lending companies very well off. Unfortunately this boon to their fortunes has done considerable harm to our current generation of college graduates and our country’s ability to compete in the world economy.

3 Responses

I can relate to this topic, as can anyone who’s borrowed to attend college or a professional school. This is a topic of intense interest to law students in particular, many of whom have borrowed in excess of $100,000 to attend expensive law schools. Many of them did so on the assumption that even a “reasonable” salary as an attorney would permit them repay back their loans and live comfortably (of course law students who want to go into public interest work suffered, but they have always been a distinct minority.) This assumption was coming into question even before the recession, but it’s especially pressing now because of the dramatic impact the recession has had on the legal market. Now many recent law school grad find themselves not in a position of having to take certain kinds of jobs they might not want, but rather, being unable to find any legal jobs at all. You can imagine how being in that position with $100,000 in debt can make you feel.

In college I read Milton Friedman’s book of essays “Free to Choose”, where he extols the benefits of a system where students borrow to attend school, then use the earnings they’ve acquired from their education to pay those loans back. I found that argument persuasive, and I’ve always believed that people should beg, borrow or steal to get into school, for the professional and monetary benefits it can have for them. But as you say the cost of a college education has risen dramatically, while the value of a college education has remained flat, or even declined. And the system has been stacked against students; however you may struggle to find a job with your college or professional degree, you’ll still likely go to grave owing that money (if the loan companies haven’t taken it out of your hide first.)

Fortunately the Obama administration looks to be shifting the scale a little bit, in favor of the students. Also, a program that will help lighten the load for students is going into effect next month. Unfortunately none of that addresses the staggering cost of higher education, the decreased value of a college degree, or the amount of money students must borrow privately to attend highly valued schools.

I can relate to this topic, as can anyone who’s borrowed to attend college or a professional school. This is a topic of intense interest to law students in particular, many of whom have borrowed in excess of $100,000 to attend expensive law schools. Many of them did so on the assumption that even a “reasonable” salary as an attorney would permit them repay back their loans and live comfortably (of course law students who want to go into public interest work suffered, but they have always been a distinct minority.) This assumption was coming into question even before the recession, but it’s especially pressing now because of the dramatic impact the recession has had on the legal market. Now many recent law school grad find themselves not in a position of having to take certain kinds of jobs they might not want, but rather, being unable to find any legal jobs at all. You can imagine how being in that position with $100,000 in debt can make you feel.

In college I read Milton Friedman’s book of essays “Free to Choose”, where he extols the benefits of a system where students borrow to attend school, then use the earnings they’ve acquired from their education to pay those loans back. I found that argument persuasive, and I’ve always believed that people should beg, borrow or steal to get into school, for the professional and monetary benefits it can have for them. But as you say the cost of a college education has risen dramatically, while the value of a college education has remained flat, or even declined. And the system has been stacked against students; however you may struggle to find a job with your college or professional degree, you’ll still likely go to grave owing that money (if the loan companies haven’t taken it out of your hide first.)

Fortunately the Obama administration looks to be shifting the scale a little bit, in favor of the students. Also, a program that will help lighten the load for students is going into effect next month. Unfortunately none of that addresses the staggering cost of higher education, the decreased value of a college degree, or the amount of money students must borrow privately to attend highly valued schools.
OH! You’re my new favorite blogger fyi

Thanks for that reply, and sharing your story with us. As I said I really think this is a big problem for our country. The high price of education is causing us to fall behind other countries in the developed world, whose governments invest more heavily in secondary education. Having a well educated population that is free to pursue the the career goals of its choosing should be seen as an asset. I am afraid that lenders have way to big an influence on our government, and our priorities on this issue are grossly out of whack. Hopefully Obama and company will be able to reverse this trend. I would really like to see some willingness on his part to step up to the plate on some of these issues.